Turning profit big hurdle for proposed SteelCorr mill

The Clarion-Ledger

On paper, the idea of a steel mill coming to Mississippi looks financially appealing.

SteelCorr Inc. would invest $650 million for construction on 1,400 acres of a 1,500-acre megasite in Columbus. Some 450 people would earn a $70,000 average annual salary plus benefits, and direct and indirect jobs could equal as many as 1,000.

But SteelCorr does face hurdles, according to some analysts. Its biggest one is turning a profit in an industry with high production costs.

Factoring equipment needed and investment to build such a facility, costs could be $900 million to $1.2 billion, said Peter Morici, an economist at the University of Maryland, who wrote a study about SteelCorr’s prospect.

“How will (SteelCorr) build a $1 billon facility for $650 million?” asked Morici, a former director of economics for the U.S. International Trade Commission.

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11 Responses to Turning profit big hurdle for proposed SteelCorr mill

  1. Anonymous says:

    It baffles me to think that they can pay all 450 of their employees an annual wage of $70,000 and still be competitive. But that is what the media is reporting. I wonder if the $70,000 is for their “salary payroll” and not for their wage payroll.

  2. Michael says:

    I too wondered about that. It struck me as an enormous number when I posted it. But here’s the exact quote:

    Some 450 people would earn a $70,000 average annual salary plus benefitsI’ll try to follow up over the next few days and see if I can find some better reporting on this wages issue.

  3. Anonymous says:

    If you think about it 70,000 is not a large sum of money for a steel mill.

  4. Michael says:

    That’s $70,000 average salary for a steel mill worker. That’s $35/hour assuming 2000 work hours per year.

    In another article, about Nucor, several years old, I found:
    [Nucor]”will hire as many as 250 workers and pay an average annual wage of $54,000.”

    http://www.nwlaborpress.org/1997/nucor.html

    That’s $27/hour average.

    Another article, about Decatur, Alabama, also Nucor, expected steel workers to earn $55,000 a year in 2002.

    http://www.careerjournal.com/salaryhiring/regional/20021118-davis.html

    Another article, 2003, rural North Carolina, $60,000

    http://www.sb-d.com/issues/winter2003/ruralamericansouth/NorthCarolina.asp

    The problem is the comparison with other countries …

    Wages and benefits cost South Korean steel makers about $13 an hour, compared with $38 an hour for integrated steel companies in the United States, reports World Steel Dynamics, a steel-consulting and research firm in Englewood Cliffs, N.J.

    The average annual wage in the South Korean steel industry is about $20,200. That seems low by U.S. standards, but the wage is nearly double the $10,200 “minimal living cost” that the South Korean government has set for a family of four. (Families whose incomes are less than that receive government assistance.)

    http://www.cleveland.com/indepth/steel/index.ssf?/indepth/steel/more/100548330034350.html

  5. Anonymous says:

    Well $70,000 per wage worker is about right. I know this because I work at the Decatur site and will only say that I am a wage worker and I make a bit more than this but I will not elaborate on the number. There are reasons that a wage worker at a steel mill, especially a mini mill, makes this type of money. Mainly because most mini mills pay is split and consist of a base and bonus system. High bonuses from making high production rates are one of the main reasons for this number being this high.

  6. Michael says:

    Well, that’s good to know. One wishes the media would report incentive or performance bonuses separately.

  7. Michael says:

    Check out this posting, especially the last paragraph. Some mills without these legacy costs have a $40/ton advantage. That’s quite a bit of advantage.

  8. Peter says:

    I live in South Korea and I can tell you that the cost of living here is not so wonderfully low. 1.8 liter of milk is $4. One watermelon is $10-20. A pound of ground beef is $10-15. A pound of fat back pork is $10-$15 (one of their dietary staples). Apartment rentals require large deposits of key money sometimes as large a $30,000-60,000. Small, poorly kept apartments can require a deposit of $5000-10,000 dollars. You can’t get a home loan to buy without 50% downpayment and most people buy apartments, not homes. A decent, very modest 3 bedroom apartment starts at $100,000 upwards to $1,000,000. This doesn’t cover apartment maintenance fees that are charged monthly and vary depending on the quality of the building. For instance, one could own an apartment costing around $250,000 and expect to pay $250 or more monthly for maintenance and security for life. Health care is cheap and national healthcare is great, at least in the basic and preventative category, $3 doctor visits and one can see whoever one wants, without an appointment. Tests, x-rays, ultrasounds and MRIs are often done in the doctors office immediately and are often only $5-10, excepting MRI’s which can cost $250. But high end, quality procedures can leave a family in the lurch, unless they’ve purchased supplementary insurance. All in all, just grocery shopping here can cost quite a bit of money, unless you plan to eat lots of rice and fermented cabbage which some people live on exclusively. What the government sets as a standard of poverty and what really are standards of poverty are two different things as we all know is the case in our country too. How many of you can live on the minimum wage that marks our poverty line?

  9. Maia Dobson says:

    I think there would be little chance for bigger profit if the production cost is too much. I work for a payroll services for small business and I know that in order to make good profit, there should be cost cutting on some areas of the production.

  10. Eden Parker says:

    Cost of living is a major variable for you to compute your savings for monthly salary accounting packages.

  11. Turning a profit is a challenge any business faces from day one. Having the right people, the right attitude, and an efficient system will go a long way to achieving just that.

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